GOLD PRICE TALKING POINTS
The price of gold has faced a sharp pullback after hitting a fresh record high ($2075) in August, and the precious metal may continue to search for support over the coming days as the rebound from the monthly low ($1863) unravels.

GOLD PRICE LEVELS TO WATCH AS REBOUND FROM AUGUST LOW UNRAVELS
The price of gold fails to extend the series of higher highs and lows from the previous week as the bullish momentum abates, and looming developments in the Relative Strength Index (RSI) may indicate a potential shift in market behavior as the oscillator falls back from overbought territory and slips to its lowest level since June.

It remains to be seen if the RSI will approach oversold territory after pushing above 70 on three separate occasions earlier this year, and macroeconomic backdrop may keep the price of gold afloat as it trades to fresh yearly highs during every single month so far in 2020.

In turn, the price of gold may test former resistance zones for support as the Federal Reserve shows little intentions of altering the course for monetary policy, and the central bank may continue to endorse a dovish forward guidance as Fed officials vow to “increase our holdings of Treasury and agency mortgage-backed securities at least at the current pace.”

Image of DailyFX economic calendar for US
As a result, the Federal Open Market Committee (FOMC) Minutes may heighten the appeal of bullion as Chairman Jerome Powell and Co. remain “committed to using our full range of tools to support the economy,” and the low interest rate environment along with the ballooning central bank balance sheets may continue to act as a backstop for the price of gold as market participants look for an alternative to fiat-currencies.

At the same time, it appears as though the crowding behavior in the US Dollar will persist over the coming days as the IG Client Sentiment report continues to show retail traders net-long USD/CHF, USD/CAD and USD/JPY, while the crowd remains net-short AUD/USD, GBP/USD, EUR/USD and NZD/USD.

The net-long US Dollar bias has carried over from July even though the DXY index has plummeted more than 8% off the April highs, and the depreciation in the Greenback may keep the price of gold afloat as the FOMC appear to be on track to retain the current policy throughout the remainder of the year.

The technical outlook for the price of gold remains constructive as it trades to fresh yearly highs during every single month so far in 2020, with the bullish behavior also taking shape in August as precious metal tags a new 2020 high ($2075).
The price of gold cleared the previous record high recorded in September 2011 ($1921) even though the Relative Strength Index (RSI) failed to retain the upward from June, but the indicator registered a new extreme reading (88) for 2020 as the oscillator pushed into overbought territory for the third time this year.
In turn, the move below 70 in the RSI could be indicative of a potential exhaustion in the bullish behavior rather than a change in trend, but a break below 30 may signal a shift in market dynamics as it would mark the first oversold reading since 2018.
Until then, the price of gold may continue to search for support as the rebound from the monthly low ($1863) unravels ahead of the Fibonacci overlap around $1971 (100% expansion) to $1985 (261.8% expansion), with lack of momentum to hold above the $1907 (100% expansion) to $1920 (161.8% expansion) region bringing the $1847 (100% expansion) to $1857 (61.8% expansion) area back on the radar, which largely lines up with the 50-Day SMA ($1844).
Next area of interest comes in around $1814 (61.8% expansion) to $1822 (50% expansion), which acted as resistance throughout the first-half of July, followed by the $1786 (38.2% expansion) region.

 

GOLD, GLD, GC PRICE ANALYSIS:

• The Gold rally has continued and this week brought the first-ever breakout above the $2,000/oz level.

• That rally didn’t slow down at the psychological level, either, as bulls continued to press up to a new all-time-high of $2,075.14.

• A Friday pullback developed in what may have been position-squaring after a really strong bullish move extended through Thursday trade.

• Friday price action is currently showing as a bearish engulfing candlestick, which may lead to a continued pullback through early next week. The bigger question is what happens when price action finds support – will bulls make another pronounced re-entry? To learn more about candlestick patterns, there’s a full sub-module in the technical analysis portion of DailyFX Education section.

GOLD GOES HAYWIRE, TAKES OUT 2K AND DOESN’T LOOK BACK UNTIL FRIDAY
This week was yet another chapter in the bullish theme for Gold, which has put in an astounding run of as much as 78.9% in a little under two years. While the bullish theme is far from new, the aggression that showed up this week does seem to highlight a more recent scenario in which Gold prices have been strongly bid even in the absence of directly obvious drivers. While US Dollar weakness helps to explain at least some of the move coming into this week; the fact that the US Dollar spent the past five days ranging while Gold continued to shred to all-time-highs seems to indicate that something else is at work.

This bullish theme in Gold finally faced a bit of pullback on Friday, syncing with the NFP release that helped to prod a bit of strength into the Greenback. Prices pulled back, swiftly taking out the gains from Thursday trade and helping to create a bearish engulfing pattern on the Daily chart.

GOLD PRICES NEAR-TERM
Gold prices on a long-term basis are overbought; but that’s been the case for a while now and, at least so far, that’s mattered little. That’s not to say that a strong retracement may not be in the immediate future, but when the Friday bearish engulfing candlestick is taken in context with the bigger picture, there’s little reason to believe that this is anything more than a pullback at this point.

Bearish engulfing candlesticks will often be approached with the aim of continuation, given that we’ve essentially seen a course correction from a high down to a fresh near-term low. But, with a matter as overbought and built-in around Gold, the question must be asked for how long that pullback might continue before bulls step in?

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This can open the door for a scenario of continuation in that pull back in the early portion of the week. The bigger question is what happens around support, of which there are a few possible areas of note. On the below four-hour chart, I’ve noted two potential zones of relevance. The nearest zone straddles that 2k psychological level and spans from a swing high at 1987.95 up to the Tuesday swing low of 2009.10. This zone remains especially interesting considering how price action just blasted through 2k without much of a pause and, to date, hasn’t checked-back for support around this price. The second deeper zone runs from the prior all-time-high of 1920.94 up to a batch of swing lows from last week around 1941.25.

GOLD PRICES – BIGGER PICTURE
This has been a fairly popular theme on DailyFX over the past couple of years and Gold was my ‘top trade idea’ for this year; and I wasn’t alone as other members of the team had focused in on the yellow metal for this year. But, few could predict what would ultimately help to bring a mania-like move into Gold, as a pandemic in the early-portion of the year has led to some highly experimental monetary policy, which has benefitted Gold considerably.

Taking a step back and looking at the bigger-picture, the unchartered territory that we find ourselves in right now can make for difficulty in employing long-term technical analysis. There’s no historical data for prices north of 2k in Gold; and the last bullish theme of this nature, also driven by Central Banks, lasted for almost three full years.

So there’s considerable scope for projections and, unfortunately, there’s little data or evidence to back any of that up. So longer-term strategies may face challenges in this backdrop; at least until there’s somewhat of a bigger-picture pullback that could re-allow for bullish triggers. RSI on the Monthly chart of Gold looked at below is now at its most overbought since 2008, which showed up just ahead of the Financial Collapse. And while the response to the Financial Collapse ultimately ended up helping to drive Gold to that fresh high, there was a tough period in the middle of the collapse in which Gold prices shed almost a 1/3rd of their value (March-September 2008).

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So, this is not an area for traders to get comfortable, even as the bullish trend in Gold has chalked up a new trophy by taking out the 2k figure on the run up to another fresh all-time-high.

 

GOLD PRICE TALKING POINTS
The price of gold tags a fresh record high ($1988) on the first day of trade for August, and the extreme reading in the Relative Strength Index (RSI) may continue to be accompanied by higher gold prices like the behavior seen earlier this year.

GOLD TAGS FRESH RECORD HIGH PRICE AS EXTREME RSI READING PERSISTS
The price of goldcontinues to trade to fresh yearly highs during every single month so far in 2020, and it remains to be seen if/how the precious metal will respond to the psychologically important $2000 mark as the bullish price action coincides with the crowding behavior in the US Dollar.

Nevertheless, it seems as though current market conditions will keep gold prices afloat as the Federal Reserve remains on track to “increase its holdings of Treasury securities and agency MBS (Mortgage-Backed Security) and agency CMBS (Commercial Mortgage-Backed Security) at least at the current pace,” and thedepreciation in the US Dollar may heighten the appeal of gold as the DXY indexplummets for sixth consecutive weeks.

In turn, the bullish momentum appears to be carrying into August as the RSI holds above 70, while the net-long US Dollar bias looks poised to persist as the IG Client Sentiment report continues to show retail traders net-long USD/CHF, USD/CAD and USDJPY, while the crowd remains net-short AUD/USD, NZD/USD, EUR/USD and GBP/USD.

Image of IG Client Sentiment
With that said, the extreme reading in the RSIalong with the crowding behavior in the US Dollar may push bullion towards the $2000 mark, and the low interest rate environment along with the ballooning central bank balance sheets may continue to act as a backstop for the price of gold as market participants look for an alternative to fiat-currencies.

The technical outlook for the price of gold remains constructive as it trades to fresh yearly highs during every single month so far in 2020, with the bullish behavior also taking shape in August as precious metal tags a new 2020 high ($1988).

The price of gold cleared the previous record high price recorded in September 2011 ($1921) even though the Relative Strength Index (RSI) failed to retain the upward from June, but the indicator registered a new extreme reading (88) for 2020 as the oscillator pushed into overbought territory for the third time this year.

The extreme reading in the RSI is likely to be accompanied by higher gold prices amid the price action seen in February, and the bullish behavior may persist as long as the indicator holds above 70.

As a result, the psychologically important $2000 mark sits on the radar, and a break/close above the Fibonacci overlap around $1971 (100% expansion) to $1985 (261.8% expansion) may push the price of gold towards the $2024 (78.6% expansion) region as the RSI sits in overbought territory.

However, lack of momentum to close above the $1971 (100% expansion) to $1985 (261.8% expansion) region may spur a move towards the overlap around $1907 (78.6% expansion) to $1920 (161.8%), and the RSI may help to validate when the price of gold has hit resistance once the indicator flashes a textbook sell signal and slips below 70.

Precious metals, such as gold and silver, have recently seen explosive price gains as financial markets continue to expect Treasury yields to remain depressed in the foreseeable future. Now recent changes in IG Client Sentiment (IGCS) warn that XAU/USD and XAG/USD may fall.

IGCS is typically viewed as a contrarian indicator. For a deeper breakdown of the analysis, check out this week’s recording of my webinar on IGCS above. There I discussed the fundamentals and key event risk ahead, such as the Federal Reserve rate decision and key tech earnings from companies like Facebook and Amazon.

GOLD SENTIMENT OUTLOOK – BEARISH
The IGCS gauge implies that 67.85% of retail traders are net long gold. Upside exposure has decreased by 5.48% over a daily basis while rising 16.88% over a weekly one. The combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias for the yellow metal.

Gold, Silver Prices May Fall Based on Technical and Positioning Signs

GOLD TECHNICAL ANALYSIS
Gold prices recently surged to an all-time high, taking out the former peak from 2011 at 1920. XAU/USD experienced a volatile session over the past 24 hours, settling in-between the 78.6% and 100% Fibonacci extensions. Guiding the yellow metal higher are two rising trend lines.

One was established in June while the other in the middle of July – red lines on the daily chart below. The latter has a steeper slope which if taken out, could pave the way for a drop to the former. Otherwise, gold may continue venturing to new highs.

SILVER SENTIMENT OUTLOOK – BEARISH
The IGCS gauge implies that 85.96% of Silver traders are net-long. Net short bets have decreased by 17.17% and 13.83% over a daily and weekly basis. Traders are also further net-long over the same periods, and the combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias.

Gold, Silver Prices May Fall Based on Technical and Positioning Signs

SILVER TECHNICAL ANALYSIS
Silver prices swung violently over the past 24 hours, leaving behind a Long-Legged Doji candlestick pattern. This is a sign of indecision that has formed in what could be the peak of XAG/USD’s uptrend. However, much like with gold, two trend lines arguably maintain the bullish bias. The first one was formed in late March.

The second one, which has a steeper slope, formed earlier this month. A daily close under the more recent one could open the door to retesting the rising trend line from March. Negative RSI divergence warns that upside momentum is fading. This can at times precede a turn lower.

GOLD PRICE TALKING POINTS
Gold trades to a fresh record high ($1945) ahead of the Federal Reserve interest rate decision on July 29, and the price for bullion may continue to carve a series of higher highs and lows as the Relative Strength Index (RSI) pushes deeper into overbought territory.

GOLD PRICE TRADES TO FRESH RECORD HIGH AMID EXTREME RSI READING
The price of goldhas traded to fresh yearly highs during every single month so far in 2020, and the extreme reading in the RSI is likely to be accompanied by higher gold prices amid the behavior seen in February.

In turn, the bullish price action may carry into August as long as the RSI holds above 70, and current market conditions may keep gold prices afloat as the Federal Open Market Committee (FOMC)vows to “increase its holdings of Treasury securities and agency MBS (Mortgage-Backed Security) and agency CMBS (Commercial Mortgage-Backed Security) at least at the current pace.”

Looking ahead, the Fed’s balance sheet looks poised to cross back above $7 trillion as it expands for the second consecutive week, and more of the same from Chairman Jerome Powell and Co. may heighten the appeal of gold as the committee remains “committed to using our full range of tools to support the economy in this challenging time.”

With that said, it seems as though the FOMC will rely on its lending facilities as well as its asset purchases to support the US economy, and the threat of a double-dip recession may push the central bank to expand the size and scope of its quantitative easing (QE) programs as Fed officials show little interest adopting a yield caps or targets (YCT) policy.

Image of IG Client Sentiment
Until then, it remains to be seen if the crowding behavior in the US Dollar will also carry into August as the IG Client Sentiment reportcontinues to show retail traders net-long USD/CHF, USD/CAD and USDJPY, while the crowd remains net-short NZD/USD, AUD/USD, GBP/USD and EUR/USD.

The net-long US Dollar exposure persists even though theDXY index continues to track the downward trend from the March high (102.99), and the low interest rate environment along with the ballooning central bank balance sheets may continue to act as a backstop for the price of gold as market participants look for an alternative to fiat-currencies.

The technical outlook for the price of gold remains constructive as it trades to fresh yearly highs during every single month so far in 2020, with the bullish behavior also taking shape in July as precious metal tags a new 2020 high ($1898).

The price of gold cleared the 2012 high ($1796) as the Relative Strength Index (RSI) established an upward trend in June, with the recent strength in the price of gold pushing the indicator into overbought territory for the third time this year even though it snapped the upward trend carried over from the previous month.

The extreme reading in the RSI is likely to be accompanied by higher gold prices amid the price action seen in February, and the bullish behavior may persist as long as the indicator holds above 70.

As a result, topside targets remain on the radar as the price of gold clears the previous record high price recorded in September 2011 ($1921), but need a close above the Fibonacci overlap around $1907 (78.6% expansion) to $1920 (161.8% expansion) to bring the $1971 (100% expansion) to $1985 (261.8% expansion) region on the radar.

The price of gold extends the series of higher highs and lows from earlier this to trade to a fresh 2020 high ($1898), and the bullish price action may persist ahead of the Federal Reserve interest rate decision on July 29 as the Relative Strength Index (RSI) pushes deeper into overbought territory.

GOLD RALLY EYES RECORD HIGH PRICE AS RSI PUSHES INTO OVERBOUGHT ZONE
The price of gold has traded to fresh yearly highs during every single month so far in 2020, and the precious metal appears to be on track to test the record high set in September 2011 ($1921) as the RSI pushes above 70 for the third time in 2020.

The extreme RSI reading is likely to keep gold prices afloat amid the behaviour seen in February, and bullion may exhibit a bullish behaviour throughout the second half of the year as the Federal Reserve relies on its lending facilities as well as its asset purchases to support the US economy.

Looking ahead, the Federal Open Market Committee (FOMC) looks poised to retain the current policy on July 29 as the central bank vows to “increase its holdings of Treasury securities and agency MBS (Mortgage-Backed Security) and agency CMBS (Commercial Mortgage-Backed Security) at least at the current pace,” and it seems as though Chairman Jerome Powell and Co. will expand the size and scope of its asset purchase programs if the US economy requires additional monetary support amid the lack of interest in adopting a yield caps or targets (YCT) policy.

Image of IG Client Sentiment
At the same time, it remains to be seen if the crowding behaviour in the US Dollar will persist ahead of the FOMC interest rate decision as the IG Client Sentiment report continues to show retail traders net-long USD/CHF, USD/CAD and USDJPY, while the crowd remains net-short NZD/USD, GBP/USD, AUD/USD and EUR/USD.

The net-long US Dollar exposure persists even though the DXY index continues to track the downward trend from the March high (102.99), and the low-interest-rate environment along with the ballooning central bank balance sheets may continue to act as a backstop for the price of gold as market participants look for an alternative to fiat currencies.

The technical outlook for the price of gold remains constructive as it trades to fresh yearly highs during every single month so far in 2020, with the bullish behaviour also taking shape in July as precious metal tags a new 2020 high ($1898).

The price of gold cleared the 2012 high ($1796) as the Relative Strength Index (RSI) established an upward trend in June, with the recent strength in the price of gold pushing the indicator into an overbought territory for the third time this year even though it snapped the upward trend carried over from the previous month.

The extreme reading in the RSI is likely to be accompanied by higher gold prices amid the price action seen in February, and the bullish behaviour may persist as long as the indicator holds above 70.

The close above the $1857 (61.8% expansion) region brings the Fibonacci overlap around $1907 (78.6% expansion) to $1920 (161.8% expansion) on the radar, which largely lines up with the record high price recorded in September 2011 ($1921), with the next area of interest coming in around $1971 (100% expansion) to $1985 (261.8% expansion).

 

SILVER, XAG/USD, COMMODITIES – TALKING POINTS:
Silver prices poised to outperform as the fundamental backdrop continues to support the liquidity-driven metal.
Bullish signals on multiple time-frames suggest this may just be the start of the rise in silver prices after validating the break of a 40-year continuation pattern.

2020 is proving to be a breakout year for liquidity-driven silver prices as the metal breaks above $20/oz for the first time since 2016.

As noted earlier, the unprecedented amount of fiscal and monetary stimulus has provided the perfect liquidity-rich environment for silver and looks set to continue with Senate Majority Leader Mitch McConnell preparing to roll out a new $1 trillion federal support package by the end of the month.

Considering cases of the novel coronavirus continue to climb in the United States, enforcing the reimposition of lockdown measures and restrictions, it is likely this may not be the last injection of fiscal stimulus introduced by US policymakers.

With that in mind, the fundamental backdrop seems to validate the recent resurgence in silver prices and may confirm the bullish technical set-ups seen on multiple time-frames.

Zooming out to a monthly time-frame highlights an immense Cup and Handle bullish continuation pattern that has taken shape over the last 40 years, with the ‘Cup’ extending from the late 1970s as price sharply collapsed from the 1980 high (41.50).

Taking the better part of 31 years to finally exceed the all-time high set at the start of the ’80s, silver has spent much of the last decade in a gradual decline, carving out the ‘handle’ over an 8-year period.

A break of ‘handle’ resistance in late 2019 propelled price just shy of the $20/oz. However, buyers were unable to overcome psychological resistance resulting in a subsequent throw-back to support at the 2015 low (13.62).

Having said that, the inability of price to close below the 2015 low (13.62) validated the topside break of the bullish continuation pattern, suggesting the resumption of the primary uptrend and potentially bringing the 2011 high (49.82) into play – should price successfully clear a multitude of resistance levels.

SILVER WEEKLY CHART – BULLISH CROSSOVER FUELING 6-WEEK SURGE
Silver Outlook: XAG/USD Poised to Rise as Stimulus Underpins Metal Prices
Silver futures weekly chart created using TradingView

Scrolling into a weekly time-frame reinforces bullish monthly price action as the 50-week moving average (17.04) crosses above the 200-WMA (16.84) in a ‘golden cross’ formation, implying further upside is on the cards.

Although the adage “past performance is not indicative of future results” applies, it is important to note that the last bullish cross-over seen on a weekly time frame generated a 950% surge in silver prices, exploding from the October 2003 low (4.75) to eventually peak at the record high set in 2011 (49.82).

Should this re-eventuate, a push to fresh record highs is not out of the question although it must be added that it certainly will not happen overnight.

As it stands, silver looks poised to rise after successfully hurdling resistance at the 2019 high (19.75), as the RSI jumps back into the overbought territory for the fifth time this year.

The steepening slope of the 50-day moving average may stoke buying pressure, with temporary support at the 78.6% Fibonacci extension (20.31) potentially providing a platform for the price to test the 2016 high (21.23).

However, divergence seen on the RSI – failing to follow price to higher highs – hints at underlying exhaustion in the recent surge from the June low and could result in a period of consolidation above pivotal support at the 2019 high (19.75).

With that in mind, a slight correction back towards the psychologically pivotal $20/oz level may serve as a platform for buyers, as they eye a push above the 2016 high (21.225) to fresh 6-year highs.

 

GOLD PRICE TALKING POINTS
The price of gold trades near the 2020 high ($1818) despite signs of crowding behavior in the US Dollar, but the precious metal may face a potential pullback as the advance from earlier this month fails to push the Relative Strength Index (RSI) into overbought territory.

GOLD PRICE HOLDS NEAR 2020 HIGH DESPITE NET LONG US DOLLAR EXPOSURE
The price of goldhas traded to fresh yearly highs during every single month so far in 2020, and the bullish behavior may persist throughout the second half of the year as the Federal Reserve vows to “increase its holdings of Treasury securities and agency MBS (Mortgage-Backed Security) and agency CMBS (Commercial Mortgage-Backed Security) at least at the current pace.”

It seems as though the Federal Open Market Committee (FOMC) will rely on its lending facilities along with its asset purchases to support the US economy even though the central bank remains “committed to using its full range of tools,” and it remains to be seen if Chairman Jerome Powell and Co. will deploy more unconventional tools as a growing number of Fed officials shows little interest in adopting a yield caps or targets (YCT) policy.

In turn, the FOMC may show a greater willingness to widen the size and scope of its asset purchase programs if the economy requires additional monetary support, and the recent contraction in the Fed’s balance sheet may prove to be short lived as the central bank appears to be on track to retain the current policy at the next interest rate decision on July 29.

The unprecedented efforts by the FOMC has dragged on the US Dollar, with the DXY index establishing a downward trend from the March high (102.99) as the greenback gives back the advance following the COVID-19 outbreak.

Image of IG client sentiment
Nevertheless, the IG Client Sentiment report reflects crowding behavior in the US Dollar as the price of gold holds near the yearly high ($1818), with retail traders net-long USD/CHF, USD/JPY and USD/CAD, while the crowd is net-short GBP/USD, NZD/USD, AUD/USD and EUR/USD.

It remains to be seen if the net-long US Dollar exposure will persist ahead of the FOMC meeting as US lawmakers attempt to nail out another fiscal stimulus package over the coming days, but the low interest rate environment along with the ballooning central bank balance sheets may continue to act as a backstop for the price of gold as market participants look for an alternative to fiat-currencies.

However, recent developments in the Relative Strength Index (RSI) warn of a potential pullback in bullion as the indicator snaps the upward trend from June after failing to push into overbought territory.

The technical outlook for the price of gold remains constructive as it trades to fresh yearly highs during every single month so far in 2020, with the bullish behavior also taking shape in July as precious metal tags a new 2020 high ($1818).

The price of gold cleared the 2012 high ($1796) as the Relative Strength Index (RSI) established an upward trend in June, but recent developments warn of a potential pullback in the price of gold as the indicator snaps the upward trend carried over from the previous month after failing to push into overbought territory.

The string of failed attempts to break/close above the $1822 (50% expansion) region may continue to generate range bound conditions, but lack of momentum to hold above $1786 (38.2% expansion) may push the price of gold back towards $1754 (261.8% expansion), with the next area of interest coming in around $1733 (78.6% retracement) to $1743 (23.6% expansion).

 

GOLD PRICE TALKING POINTS
The price of gold appears to be stuck in a narrow range after trading to a fresh 2020 high ($1818) earlier this month, but the Relative Strength Index (RSI) may offer a bullish signal if the indicator produces the extreme readings seen in February.

GOLD PRICE FORECAST: EXTREME RSI READING TO OFFER BULLISH SIGNAL
The price of goldhas traded to fresh yearly highs during every single month so far in 2020, and the bullish behavior may persist even though the Federal Reserve’s balance sheet slips below $7 trillion in July as the RSI clings to the upward trend from June and continues to flirt with overbought territory.

Looking ahead, the contraction in the Federal Reserve’s balance sheet may prove to be short lived as the Federal Open Market Committee (FOMC) remains “committed to using its full range of tools” and vows to “increase its holdings of Treasury securities and agency MBS (Mortgage-Backed Security) and agency CMBS (Commercial Mortgage-Backed Security) at least at the current pace.”

However, the FOMC appears to be in no rush to provide additional monetary support as officials shows little interest in adopting a yield caps or targets (YCT) policy, and it remains to be seen if the central bank will alter the forward guidance as Chairman Jerome Powell and Co. agree that “it will be important in coming months for the Committee to provide greater clarity regarding the likely path of the federal funds rate and asset purchases.”

A recent speech by Fed Governor Lael Brainard suggests the central bank will carry out a wait-and-see approach as the FOMC voting member insists that “it likely will be appropriate to shift the focus of monetary policy from stabilization to accommodation by supporting a full recovery in employment and a sustained return of inflation to its 2 percent objective.”

Nevertheless, Brainard warns that “the earlier-than-anticipated resumption in activity has been accompanied by a sharp increase in the virus spread in many areas,” with the official emphasizing that “some high-frequency indicators tracked by Federal Reserve Board staff (including mobility data and employment in small businesses) suggest that the strong pace of improvement in May and the first half of June may not be sustained.”

In turn, Brainard argues that it will be important for the Federal Reserve “to avoid the premature withdrawal of necessary support,” and it seems as though the FOMC will rely on its lending facilities along with its asset purchases to support the US economy as the central bank moves to “the next phase of monetary policy.”

At the same time, Dallas Fed President Robert Kaplan, a 2020-voting member on the FOMC, warns that “the rebound that we expected at the end of the second quarter and in the third quarter is stalling somewhat” on the back of the growing number of COVID-19 cases, and went onto say that “with the unemployment rate so high, some form of extension of unemployment benefits is going to be critical” during an interview with CNBC.

The remarks indicate the FOMC will retain a dovish forward guidance at the next interest rate decision on July 29 even though US lawmakers mull another COVID-19 recovery bill, and the low interest rate environment along with the ballooning central bank balance sheets may continue to act as a backstop for the price of gold as market participants look for an alternative to fiat-currencies.

The technical outlook for the price of gold remains constructive as it trades to fresh yearly highs during every single month so far in 2020, with the bullish behavior also taking shape in July as precious metal tags a new 2020 high ($1818).

The price of gold cleared the 2012 high ($1796) as the Relative Strength Index (RSI) established an upward trend in June, and the oscillator may offer a bullish signal if it rebounds from trendline support and produces the extreme readings seen in February as a break above 70 would indicate that the bullish momentum is gathering pace.

Still need a break/close above the $1822 (50% expansion) region to open up the $1857 (61.8% expansion) area, but lack of momentum to hold above $1786 (38.2% expansion) may generate a larger pullback in the price of gold, with the first area of interest coming in around $1754 (261.8% expansion) followed by the Fibonacci overlap around $1733 (78.6% retracement) to $1743 (23.6% expansion).

 

GOLD & CRUDE OIL TALKING POINTS:
Gold prices drop with stocks as the US Dollar gains on haven demand
Crude oil prices flirt with bearish reversal as US-China tensions swell
Stock index futures signal risk-off bias likely to carry into the week-end
Gold prices fell alongside stocks as escalating US-China tensions soured market sentiment. The risk-off backdrop drove haven demand for the US Dollar, which undermined the appeal of anti-fiat alternatives epitomized by the yellow metal, driving it downward. Crude oil prices likewise fell as the defensive backdrop swept up the range of cycle-sensitive assets.

The US was reported to be readying a federal contract ban on companies using Huawei technology, and also brought Magnitsky Act charges against several Chinese officials over alleged human rights abuses in Xinjiang province targeting the Uighur community. Reports of swelling Covid-19 cases in the US probably compounded negativity.

The downbeat mood extended from Wall Street into Asia-Pacific trade and more of the same looks likely ahead. Stock index futures tracking top European and US benchmarks are pointing sharply lower, suggesting liquidation will carry through into the week-end. A sparse offering on the economic data docket offers few roadblocks to derail established momentum.